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NEW YORK TAXPAYERS CONTEST DETERMINATION THAT INVESTMENT WAS NOT "AT RISK."

JUN. 26, 1992

Wong, Robert, et ux. v. Commissioner

DATED JUN. 26, 1992
DOCUMENT ATTRIBUTES
  • Case Name
    ROBERT WONG AND MILDRED L. WONG, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
  • Court
    United States Tax Court
  • Docket
    Docket No. 14368-92
  • Authors
    Eagan, John J.
  • Code Sections
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 92-86536
  • Tax Analysts Electronic Citation
    92 TNT 155-138

Wong, Robert, et ux. v. Commissioner

 

=============== SUMMARY ===============

 

Robert and Mildred Wong of Scarborough, N.Y., have challenged $102,911 in adjustments to their taxable income for the years 1984, 1986, 1987, and 1988, as a result of adjustments by the commissioner to interest, rental income, management fees, and depreciation from leasing activities upon the determination that they were not substantially "at risk."

The petitioners claim that the indebtedness incurred relating to Robert Wong's sale and leaseback activities involving $255,000 in computer equipment was recourse and a bona fide obligation, and that the basis of his investment was at risk.

Period and Amount at Issue: 1984 -- $23,204; 1986 -- $12,546; 1987 -- $5,965; 1988 -- $871

Code Section Classification: 465

 

=============== FULL TEXT ===============

 

PETITION

Petitioners hereby petition for a redetermination of the deficiencies set forth by Respondent in her notices of deficiency (bearing symbols AP:NY:AH) dated April 2, 1992, and as the basis for their case allege as follows:

1. Petitioners are individuals with legal residence now at County Club Lane, Scarborough, New York 10510. Petitioner Robert Wong's Social Security number is * * * and Petitioner Mildred L. Wong's Social Security number is * * * . The periods involved are the taxable years ending December 31, 1984, 1986, 1987 and 1988. The returns for the periods involved were filed with the Internal Revenue Service Center, Holtsville, New York.

2. The notices of deficiency (copies of which, including so much of the schedules accompanying the notices as are material, are attached and marked Exhibit A-1 and A-2) were mailed to Petitioners on April 2, 1992, and were issued by the Office of the Internal Revenue Service, P.O. Box 2954, Church Street Station, New York, New York 10008.

3. The deficiencies as determined by Respondent are in income tax for the calendar year 1984 in the amount of $23,204; 1986 in the amount of $12,546; 1987 in the amount of $5,965; and 1988 in the amount of $871; all of which are in dispute. Petitioners also dispute all interest, penalties and additions to tax proposed to be assessed by Respondent with respect to such deficiencies.

4. Respondent's determination as set forth in the said notices of deficiency is based upon the following errors:

(a) Respondent erred in determining that Petitioners' taxable income should be adjusted by $47,354 for 1984, $33,071 for 1986, $19,847 for 1987, and $2,639 for 1988, as a result of adjustments made by Respondent to interest, rental income, management fees and depreciation claimed by Petitioners on their Form 1040 for the year 1984, 1986, 1987 and 1988.

5. The facts upon which Petitioners rely, as the basis for their case, are as follows:

(a) During the taxable year ending December 31, 1984, Petitioner Robert Wong purchased certain computer equipment for $255,000 and leased the equipment to the seller. Petitioners reported their income and deductions with respect to the purchase and lease of the equipment or Schedule C of their 1984 Form 1040, and Schedule E of their 1986 and 1988 Form 1040's.

(b) Respondent has proposed to disallow all Petitioners' income and deductions for the taxable years ending December 31, 1984 and 1986, 1988 with respect to the equipment leasing activity, on the basis that Petitioners (i) have not established that their acquisition and lease of the computer equipment was an activity entered into for profit; and (ii) have not demonstrated that their "at risk" basis was greater than zero based upon a determination by Respondent that the indebtedness incurred by Petitioner Robert Wong was in substance non-recourse. The proposed disallowances would reduce Petitioners' income and deductions for the taxable periods in issue and would result in the adjustments proposed by Respondent.

(c) The determination of Respondent as set forth in Exhibit A-1 and Exhibit A-2 should not be sustained because the equipment purchase and lease transaction was entered into for profit and the indebtedness incurred was recourse and a bona fide obligation. Thus all interest, rental income, management fees and depreciation claimed by Petitioners should be allowed.

WHEREFORE, Petitioners pray that the United States Tax Court will determine that there is no deficiency in income tax for the taxable years ending December 31, 1984, 1986, 1987 and 1988.

Dated: June 23, 1992

 

 

John J. Eagan, Esq:

 

Tax Court Bar # EJ0281

 

 

John M. Hanamirian

 

Tax Court Bar # HJ1301

 

 

Counsel for Petitioners

 

 

NORRIS, McLAUGHLIN & MARCUS

 

A Professional Corporation

 

721 Route 202-206

 

P.O. Box 1018

 

Somerville, NJ 08876-1018

 

(908) 722-0700
DOCUMENT ATTRIBUTES
  • Case Name
    ROBERT WONG AND MILDRED L. WONG, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
  • Court
    United States Tax Court
  • Docket
    Docket No. 14368-92
  • Authors
    Eagan, John J.
  • Code Sections
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 92-86536
  • Tax Analysts Electronic Citation
    92 TNT 155-138
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